Thursday, 28 August 2014

Asia today - iron ore and the Aussie $, Chinese property and the Shanghai bourse

A few charts and then some company analysis - the earnings season certainly is not over in Asia!

First, lots of continued discussion on the iron ore price which is falling to a very interesting level:

I have struggled recently to justify some of these moves and earlier this month doubled my Rio Tinto short (link here) following headline 'good' results.  I have also been looking for an opportunity to augment my Australian index short with one in the Australian dollar.  As this excellent chart via @vicbatch shows any correlation between the Australian dollar and the commodity price index has completely broken down this year...

Another interesting anomaly is the reasonably good performance of the Chinese property stocks, as shown below, via the Shanghai Property index whilst...

...the metrics on the Chinese property companies (as nicely summarised here in a chart highlighted by @MktOutperform) are getting worse:

In clearly related news also no surprises to read via Fast FT that 'Country Garden, one of China's largest property developers dropped more than 6 per cent after it launched a 1-for-15 rights issue, giving investors new shares at a 31 per cent discount to the last closing price. Country Garden raised $410m in the offering, to pay debts and lower its leverage as the country's property slowdown deepens'

Chances of a tactical 'swoon' in the Chinese property market looks pretty clear to me...which is why (as noted here) stimuli options are being considered/implemented specifically and...more generally, unsurprising to read this earlier today:

'The Chinese government launched a "fresh round of mini-stimulus"...The measures aim to support the agricultural sector, boost investment in public facilities and improve environmental protection...The People's Bank of China (PBOC) has given banks a larger re-lending quota at lower rates to support the farm sector. It granted a 20 billion yuan ($3.26 billion) re-lending quota to its local branches to guide rural financial institutions to step up lending support to the sector, it said on its website late Wednesday'

The general Shanghai bourse is running into resistance too.  Clearly the transition of Chinese equities from 'cheap' to 'a stock picker's market' is complete.  Harder going from here versus the last few months.

On that basis company earnings analysis becomes more important...and some more reviews are coming up in the next posting.  

No comments:

Post a Comment